medium · Private Credit documentation-covenants-terms
What is the primary purpose of an 'upstream guarantee' from a subsidiary to a parent company borrower?
- To protect the subsidiary itself from ever being sold off by the parent during the loan's full term.
- To ensure the lender has a direct legal claim against the assets and cash flow of the operating subsidiaries.
- To allow the subsidiary to borrow money directly from the parent company at a below-market interest rate.
- To cap the total amount of additional secured debt the subsidiary is permitted to raise from other outside lenders.
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